Today’s REI Classroom Lesson

Today, Larry Goins goes over ways to close a deal when you don’t have funds available.

REI Classroom Summary

Land trusts and simultaneous transactions are two options to consider if you need to close a deal without funds available.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.

Larr: Larry Goins and welcome back to REI Classroom. I’m really excited that you’re here because today, I’m going to talk about the different ways you can close on a deal when you have no money. Now, one of my other trainings, I talk about funding a deal when you have no money. So be sure and check it out as well. But on this week, we are going to talk about how to close a deal when you have no money.

Larry: Now there are several ways that I want to share with you today. The first way is doing what’s called a simultaneous transaction. In other words, say you are buying a house for $50,000 and you’re selling it for $60,000, and you have your buyer lined up to buy from you at the exact same time. Well, what you do is you find an attorney or a closing company like a title company or an attorney, and you have them be able to use your buyer’s money to pay your seller.

So in other words, you show up to closing. You’ve put up your deposit on the property, and your buyer shows up. They’ve brought their $60,000 to closing, and the closing attorney will use $50,000 of that to pay your seller, and then the other $10,000 minus closing cost, of course, goes to you. It’s called a simultaneous closing.

Now not every attorney will do that. Not every title company will do that. What I would suggest is talk to your local REI group, and find a local attorney or title company that is what’s called “investor-friendly,” and some of the people that your rear group will know about who those are.

The next thing I want to talk to you about is using a trust. You can use a land trust and you can do what’s called an assignment of beneficial interest using a trust. So you get a property under contract in the name of the trust. For example, 125 Oak Street Trust, and you’re buying that property for $50,000. The contract is in the name of the trust, and you are the beneficiary.

Well, maybe it’s a bank-owned property. Maybe it’s a hard-on property. Maybe it’s just listed with the realtor and you cannot assign it so here is what you do. You find your buyer to pay you $60,000. And then what you do is instead of selling the property, you are going to sell your beneficial interest in the trust. It’s only one real estate transaction so the buyer of the property who is really just taking title to the trust, or taking ownership or the beneficial interest of the trust, they show up to closing with their $60,000. $50,000 goes to buy the property in the name of the trust, and then $10,000 of it is to pay you to assign your beneficial interest to the new buyer. It’s one real estate transaction, and it’s a way to basically assign a non-assignable contract.

And the last way I want to share with you is to create a brand new cooperation or LLC and then you sell the shares. It’s very similar to a trust except instead of assigning the beneficial interest, you’re going to create a new LLC that’s going to buy that property or get that property on the contract. For example, it might be 125 Oak Street LLC, and you are 100% ownership of that.

Then what you do is you go find a buyer to buy the property, and then you sell them your shares in that LLC, which is the only thing that LLC owns is a contract to buy this property. You sell them the shares of the LLC for your wholesale fee or your transaction fee, whatever you’re getting, say it’s $10,000 like the example we’ve been using.

So that’s many different ways right there you can use to close on a deal when you have no money. So I’m Larry Goins and I hope you really enjoyed this episode.

Mike: HomeVestors, the “We Buy Ugly Houses” folks, is a franchised system of hundreds of real estate investors that have purchased over 65,000 houses. If you’d like to learn more about the most powerful real estate investing system in existence, whether you’re a pro looking to take your business to the next level or whether you have no experience at all, but a burning passion to be successful in real estate investing, please visit FlipNerd.com/ugly to learn more.

Please note, the views and opinions as expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.

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Larry Goins is an author, trainer and national speaker. He has written several books on real estate investing that are available wherever books are sold. He is making his latest book, HUD Homes Half Off!, available for free for a limited time at FreeHUDBook.com.